The Future of Capitalism by Paul Collier; Penguin, £9.99
AS the end of lockdown looms, albeit at a glacial pace, there is increasing talk of ‘building back better’ and ‘levelling up’. Fine words, but how? Implicit in this laudable desire is an acknowledgement that capitalism as currently implemented in the UK and other western nations is not working for everyone, possibly not for many. There is growing evidence that the wretched lockdown has widened the gap between rich and poor – and that’s before the furlough scheme ends and Rishi’s magic money tree evaporates. Enter the paperback edition of an interesting and important book by Sir Paul Collier, eminent professor of economics at St Antony’s College, Oxford.
Sir Paul starts by dismissing socialism as a viable alternative and then goes on to investigate what is going wrong with capitalism. He thinks this is a relatively recent problem, asserting that the period 1945-70 was a golden era of liberal democracy. Quite how he chose those dates, particularly the 1970 cut-off, is never explained. This rather compromises his arguments; as I recall the 1970s ran on seamlessly from 1969 and ended with the three-day week, the UK having an IMF bail-out and eventually the winter of discontent.
He notes that while practical capitalism is based largely on Adam Smith’s The Wealth of Nations, the (necessary) creation of rational economic man (the basis of economic thought and models) led to ‘Greed is Good’. He argues, compellingly, that capitalists should also heed Smith’s other work, The Theory of Moral Sentiments, which, in setting out the difference between what we want to do (economic man) and what we ought to do (ethical man) creates three levels of obligation. The intimate (family), the social (to one’s society) and of rescue (to remote persons in peril). It’s the social failure that is causing the failure of capitalism.
Sir Paul makes this argument convincingly for most of the time, albeit in a manner that flits between the highly academic and his (wide) personal experience. Fortunately he is a master of his trade and writes engagingly so the book is very readable. Where economic explanations are necessary they are clear and well referenced. Along the way he explains how the Brexit vote came as a surprise to the political classes in the ivory towers of academe and government, why educational failure has led to the polarisation of the potential of the woke generation (there are no tiger mums in the tenements) and how the UK’s planning system is a root cause of the perpetuation of the inequality of opportunity that is at the heart of capitalism’s current problems. (In this last explanation the book is, of necessity, quite high level; the concerned reader might want to read Liam Halligan’s Home Truths to understand the whole problem and possible solutions).
So what does Sir Paul suggest that we do about it? He advocates pragmatism over theoretical purity, deliciously ironic from a lecturer in the institution that has given us the cohorts of politicians with a degree in PPE who have contributed to this mess. He accepts that his book is a mea culpa on behalf of economists and tentatively suggests that running companies for the benefit of shareholders might not deliver the best outcomes. Ultimately he concludes that the problem is a political one, not an economic one.
This is, I think, dynamite. An eminent practitioner of the dismal science that has led political policy throughout my lifetime is saying that the pre-eminence of economic theory in the thoughts of our political leaders is the root of the problem. Although he’s probably correct, he offers little on how to fix this. But his closing words will resonate with many thinking voters:
‘By eschewing shared belonging, and the benign patriotism that it can support, liberals have abandoned the only force capable of uniting our societies behind remedies. Inadvertently, recklessly, they have handed it to the charlatan extremes, which are gleefully twisting it to their own warped purposes.
‘We can do better: we once did so, and we can do it again.’
Indeed. But who will lead this transformation? They need to get on with it.